The client
A couple already owning their own home decided to buy a three-unit rental property in the Fredericton market as a pure investment. All three units came with tenants and signed leases in place — a fully-occupied, cash-flowing investment property mortgage from day one. What nearly stalled the deal had nothing to do with the property and everything to do with which lender's rental-income policy the file landed on first.
Borrowers
Couple, both salaried
$155,004/year combined
Own housing
$2,600/month
Their existing principal-residence carrying cost
Other debt
$400/month
Vehicle loan
Purchase
$540,000 triplex, Fredericton
20% down ($108,000); uninsured investment property
Leases
$1,450 + $1,300 + $1,150 = $3,900/month
All three units tenanted, signed leases
The triplex's own carrying costs, before any rent is credited:
| Subject property (qualifying) | Monthly |
|---|---|
| P&I at the qualifying rate ($432,000 at 7.09%) | $3,050 |
| Property tax, whole triplex | $420 |
| Heat (lender-standard estimate) | $150 |
| Total qualifying carrying cost | $3,620 |
The problem
The couple's own bank applies an add-back for rental income on a non-subject property: add half of the gross rent to income, and carry the full carrying cost as a liability. That treatment is common, and on a three-unit property it moves less than it might on a single unit — the file still missed.
The add-back arithmetic
- ▸Income used: $12,917 + $1,950 (50% of the $3,900 total rent) = $14,867/mo
- ▸Liabilities: $2,600 own housing + $400 vehicle loan + $3,620 full triplex carrying cost = $6,620/mo
- ▸TDS: $6,620 ÷ $14,867 = 44.5% — a hair over the bank's guideline
Half a point over guideline is still a decline. The rent from three fully-tenanted units genuinely does most of the work of carrying this property — but the add-back's income boost was not enough to offset carrying the full $3,620 as a straight liability.
The numbers
As an uninsured investment purchase at 20% down, there is no default-insurance premium to structure — the qualifying-rate test on the mortgage itself is the whole of the arithmetic before rental treatment even enters the picture.
| Structuring the uninsured purchase | Amount |
|---|---|
| Purchase price | $540,000 |
| Down payment (20%) | −$108,000 |
| Mortgage | $432,000 |
| Rate & payments | Figure |
|---|---|
| Contract rate (illustrative, not a quote) | 5.09% |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 7.09% |
| Monthly P&I at the qualifying rate — the ratios run on this | $3,050 |
| Monthly P&I at the contract rate — what would actually be paid | $2,535 |
Add-back vs. offset, on the same three leases
The 50% add-back and 80% rental offset percentages are illustrative of two common structures; each lender publishes its own, as covered in rental income offset methods, compared.
| TDS line | Bank A — 50% add-back | Lender B — 80% offset |
|---|---|---|
| Rent treatment | +$1,950 to income | $3,900 × 80% = $3,120 credited against costs |
| Subject property net liability | $3,620 (full) | $3,620 − $3,120 = $500 |
| Income used | $14,867 | $12,917 |
| TDS vs. guideline | 44.5% ✗ | 27.1% ✓ |
The offset applies the rent against the property's own costs before anything reaches the ratios; only the $500 shortfall lands as a liability. The same three leases swing the file more than 17 TDS points.
The solution
A New Brunswick mortgage broker treated the bank's decline as a statement about that lender's rental-income policy on multi-unit properties, not a verdict on a fully-tenanted triplex. Every unit had a signed lease and a paying tenant — the only variable that mattered was which lender's guidelines got to read those leases.
The file moved to a lender whose published policy offsets gross rent against the subject property's own carrying costs, crediting the shortfall rather than the full cost as a liability. That single change turned a marginal decline into an approval with real margin.
With TDS at 27.1% instead of 44.5%, underwriting had no reason to push back on any single line item — the file simply worked. The couple's own home financing was untouched throughout; nothing about their existing mortgage or its terms needed to change to make the triplex purchase qualify.
The outcome & the closing math
Approved and funded as an uninsured triplex purchase at 20% down. The closing cash beyond the down payment:
| Cash due at closing (beyond the down payment) | Amount |
|---|---|
| New Brunswick's flat 1% real property transfer tax on $540,000 | $5,400 |
| Legal fees & adjustments | varies |
New Brunswick charges a flat 1% on the greater of the sale price or the assessed value, with no first-time-buyer exemption — the same rate applies regardless of unit count.
What to take from this file
- 01A multi-unit property does not automatically make an add-back safe. Half of $3,900 in rent still was not enough to offset carrying the full property cost as a liability — know the actual math before you promise a client an outcome.
- 02The swing between add-back and offset scales with the number of units. This file moved more than 17 TDS points on three leases; a single-unit file typically moves less.
- 03A decline that misses by half a point is still a decline — and still a data point about the lender, not the property. Three fully-tenanted units and clean credit did not change the outcome at the first lender.
- 04Budget New Brunswick's flat 1% transfer tax regardless of the property's unit count. There is no first-time-buyer relief on this tax, and it applies the same way to a triplex as to a single-family home.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸Real Property Transfer Tax Act, S.N.B. (via laws.gnb.ca) — New Brunswick's flat 1% real property transfer tax.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸5.09% contract rate — rates move daily; not a quote.
- ▸50% add-back / 80% offset percentages — each lender publishes its own rental-income treatment.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.